The ballooning federal debt is just such a divisive and inevitable crisis, and it is our greatest national security threat. The situation sorely needs President Obama’s leadership, and he has failed to provide it.
PRESIDENT OBAMA created the bipartisan Simpson-Bowles Commission to find a way to reduce the deficit. After a majority of the commissioners approved a balanced deficit reduction plan, the president ignored the results. Deficit reduction needed his leadership, and he did not provide it.
In his proposed 2013 budget, the president spelled out his 10-year revenue and spending plan. The highlights were no cuts in entitlements; tax increases for those making more than $250,000; continuing deficits; and a dramatically increased federal debt.
Taxing the wealthy may be politically popular, but it reduces the 10-year deficit by less than 10 percent. The additional taxes on the wealthy that the president proposed would increase revenue by $700 billion over the next 10 years. During that period, the debt is expected to increase by $8.5 trillion.
The federal debt would continue its exorbitant climb and threaten our future.
FORMER MASSACHUSETTS Gov. Mitt Romney has not provided a plan, but he has given us the easy part – namely, tax cuts. He has promised a 20 percent reduction in all personal income tax rates; reduction of the corporate tax rate from 35 percent to 25 percent; elimination of the alternative minimum tax and the estate tax; and a lowering of the capital gains tax for couples making less than $200,000.
Romney says his tax plan will raise the same amount of money because he will eliminate wasteful deductions and tax expenditures.
But the largest deductions affect the middle class, not corporations. The four greatest deductions or tax expenditures in the tax code are: untaxed employee health insurance benefits; home mortgage interest; untaxed contributions to retirement plans; and lower tax rates for capital gains and dividends.
THUS, ACCORDING to a study by the nonpartisan Tax Policy Center, the middle class would see a net tax increase. The loss of popular deductions would cost taxpayers more than their savings from lower tax rates. The wealthy would get a tax cut.
A plan with increased taxes for the middle class and tax cuts for the wealthy would not be approved by either party in Congress. Romney’s tax plan would be dead on arrival.
Romney avoids further bad news by not telling us what spending he would cut to reduce the deficit. Under Romney’s plan, the federal debt will continue its inexorable climb. What sounds so painless when unspecified is near impossible in reality.
For fiscal conservatives, the presidential candidates are a bust. Neither candidate has a viable plan to fix the deficit. Obama’s plan is mathematically inadequate, and Romney’s plan is mathematically dubious, and politically impossible.
Their plans are qualitatively different to appeal to different constituencies. Obama’s spending would benefit the middle class and the poor, while Romney’s tax cuts would benefit the wealthy.
But each plan is a different irresponsible path to the same devastating debt crisis. Both condemn future generations to massive tax hikes and spending cuts that will dominate their financial lives.
Make no mistake. Fixing the deficit is hard, and it is the greatest political challenge of our time. It will require shared sacrifice from rich and poor, right and left, east and west.
America’s president needs the skill and courage to unite us in this struggle, not divide us.
(The writer is a retired U.S. Navy commander. He lives and writes in Savannah.)